Highest minimum wage, lowest unemployment rate

Click to enlargeChris Tarnawski

❝ In 2014, Seattle passed an ordinance to eventually raise the minimum wage in the city to $15 an hour, giving the Pacific Northwest city the highest pay floor in the U.S.

❝ The ink wasn’t even dry on the wage legislation when the dire warnings of economic collapse began. Unemployment would skyrocket, economic growth in the state would be hurt, restaurants and small businesses would close en masse. The deserved punishment would be swift and harsh.

But a funny thing happened on Seattle’s way to economic collapse: the city thrived. Restaurants didn’t close — they actually prospered — and new restaurant openings rose. Unemployment fell, most recently to less than 4 percent, more than a full percentage point lower than the national rate. By all accounts the city on the Puget Sound is booming.

❝ How did the doomsayers get it so wrong? As in so many other cases of politically motivated economic analysis, this was what the opponents hoped would happen because it fit with way they think world should work. But given what we know about Seattle…higher minimum wages can improve workers‘ living standards and stimulate the local economy.

Blame a fundamental misunderstanding of minimum-wage economics and, of course, good old-fashioned political bias. There have been repeated attempts to misread the data and conclude it has hurt employment, but so far none of this research has withstood scrutiny.

Trump doesn’t own the Big Lie. Republicans – whose party loyalty supersedes economic reality – cling to the tactic as tightly as, say, any scholarly limpet who still prattles about trickle-down benefits to the working class.

Thanks, Barry Ritholtz

Who is poor in the United States — An update

Recently, the Census Bureau released its annual report on poverty. The report showed that the official rate of poverty in 2015 was 13.5%, down 1.2 percentage points from 2014. Using the Current Population Survey March Supplement, the data used for the Census poverty report, we update our recent analysis to describe the characteristics of the poor in 2015 and changes in these characteristics over the last year.

The characteristics of individuals living in poverty did not change substantially from 2014 to 2015. Children still comprise more than a third of those living below poverty and students an additional 7 percent. A quarter of those living below the poverty threshold are in the labor force, either working or searching for work. Senior citizens, early retirees, the disabled, and caregivers constitute the remaining thirty percent of those living in poverty. Only 3 percent of those living in poverty fall outside of the groups just mentioned…

In order to address poverty, we must know who is poor and how the composition of who is poor is changing. This analysis describes who was living in poverty in 2015 and how that changed from the prior year. As with our analysis of poverty in 2014, this update suggests that when poor working-age adults are not employed full-time, they are often disabled, receiving education, or engaged in caregiving.

It takes a well-funded think tank like Brookings to roll out a PR piece like this without noting even though the United States is the wealthiest nation on the planet this is the best we come up with. Not a surprise for a nation which considers healthcare a privilege – instead of a right. But, then, that matches the opinion of many “important” opinion-makers predominant in our press.

Here’s a link to the Census Bureau report.

How Trump happened

By Nobel Laureate Joseph Stiglitz

❝ As I have traveled around the world in recent weeks, I am repeatedly asked two questions: Is it conceivable that Donald Trump could win the US presidency? And how did his candidacy get this far in the first place?

❝ As for the first question, though political forecasting is even more difficult than economic forecasting, the odds are strongly in favor of Hillary Clinton. Still, the closeness of the race (at least until very recently) has been a mystery: Clinton is one of the most qualified and well prepared presidential candidates that the United States has had, while Trump is one of the least qualified and worst prepared. Moreover, Trump’s campaign has survived behavior by him that would have ended a candidate’s chances in the past…

So why would Americans be playing Russian roulette (for that is what even a one-in-six chance of a Trump victory means)? Those outside the US want to know the answer, because the outcome affects them, too, though they have no influence over it.

❝ And that brings us to the second question: why did the US Republican Party nominate a candidate that even its leaders rejected?…

❝ …For starters, many Americans are economically worse off than they were a quarter-century ago. The median income of full-time male employees is lower than it was 42 years ago, and it is increasingly difficult for those with limited education to get a full-time job that pays decent wages.

Indeed, real (inflation-adjusted) wages at the bottom of the income distribution are roughly where they were 60 years ago. So it is no surprise that Trump finds a large, receptive audience when he says the state of the economy is rotten. But Trump is wrong both about the diagnosis and the prescription. The US economy as a whole has done well for the last six decades: GDP has increased nearly six-fold. But the fruits of that growth have gone to a relatively few at the top – people like Trump, owing partly to massive tax cuts that he would extend and deepen.

❝ At the same time, reforms that political leaders promised would ensure prosperity for all – such as trade and financial liberalization – have not delivered. Far from it. And those whose standard of living has stagnated or declined have reached a simple conclusion: America’s political leaders either didn’t know what they were talking about or were lying (or both).

There are two messages US political elites should be hearing. The simplistic neo-liberal market-fundamentalist theories that have shaped so much economic policy during the last four decades are badly misleading, with GDP growth coming at the price of soaring inequality. Trickle-down economics hasn’t and won’t work. Markets don’t exist in a vacuum. The Thatcher-Reagan “revolution,” which rewrote the rules and restructured markets for the benefit of those at the top, succeeded all too well in increasing inequality, but utterly failed in its mission to increase growth.

❝ This leads to the second message: we need to rewrite the rules of the economy once again, this time to ensure that ordinary citizens benefit. Politicians in the US and elsewhere who ignore this lesson will be held accountable. Change entails risk. But the Trump phenomenon – and more than a few similar political developments in Europe – has revealed the far greater risks entailed by failing to heed this message: societies divided, democracies undermined, and economies weakened.

Joe Stiglitz is solid as ever. RTFA for many details I omitted.

One of those times when I wish he wasn’t so inspiring. In recent years, I have pointed my “deepest” economic and political commentary to China, to others interested in, focussed on the dynamism we’re witnessing in Asia. Joe is right, of course. And we’re not going to contribute much from the United States to getting this planet’s culture and environment on track without sorting out the criminal mess that has grown to rule this nation.

Geography lesson: The majority of the world’s population lives inside this circle

Click to enlarge

The circle holds 22 of the world’s 37 megacities – massive cities that hold at least 10 million inhabitants. It also includes the five most populous cities on the planet: Tokyo, Jakarta, Seoul, Karachi, and Shanghai, which alone combine to hold 144.5 million people…

❝ The circle contains a lot of people, but it also has:

The highest mountain (Everest)
The deepest ocean trench (Mariana)
More Muslims than outside of it.
More Hindus than outside of it.
More Buddhists than outside of it.
More communists than outside of it.
The most sparsely populated country on earth (Mongolia)

Thanks, Barry Ritholtz

Attention Shoppers: Nuclear power plant for sale cheap$ (needs work)

Click to enlargeTVA

❝ After spending more than 40 years and $5 billion on an unfinished nuclear power plant in northeastern Alabama, the nation’s largest federal utility is preparing to sell the property at a fraction of its cost.

The Tennessee Valley Authority has set a minimum bid of $36.4 million for its Bellefonte Nuclear Plant and the 1,600 surrounding acres of waterfront property on the Tennessee River. The buyer gets two unfinished nuclear reactors, transmission lines, office and warehouse buildings, eight miles of roads, a 1,000-space parking lot and more…

❝ The sale is bittersweet for site manager Jim Chardos, who went to work at Bellefonte in 1994 expecting it to be finished as a nuclear power plant. All these years later, he commutes 90 minutes each way to work to oversee a plant that has never been stocked with radioactive fuel or used either of its reactors to generate a single watt of electricity.

Work began at Bellefonte in the mid-’70s on the backside of the nuclear energy boom in the United States, Chardos said. The utility initially planned to construct four reactors at the site, but demand for power in the region never met those early expectations and work halted in 1988. A series of starts and stops preceded TVA’s decision earlier this year to sell Bellefonte.

“If you’re going to make 1,200 megawatts you need to sell it to somebody, and if there’s no need for it you’re not going to finish,” he said. “And that’s really what’s happened.”

I advocated for nuclear power plants for over a half-century. Started-out working for a subcontractor/vendor and learned enough about the process to consider it worthy. Ideally – which means “almost impossible in the United States – nuclear power plants can produce lots of affordable electricity over their lifespan. Radioactive fuel can be recycled. Safe construction is not rocket science.

Just not in the United States. and in recent years, the diminishing cost and alternatives – especially solar electricity – makes the question moot. Nuclear power can’t compete in our markets.

Examples of China’s commitment to combating climate change

Click to enlargeReuters/Jason Lee

❝ Two years after President Obama and Chinese President Xi Jinping announced that their countries would work together to combat climate change, Republicans and conservatives in the U.S. continue to cite China’s rising carbon emissions as a reason not to bother cutting our own.

Earlier this month, Donald Trump’s economic advisor Stephen Moore claimed that limiting our carbon pollution is pointless because of China’s supposedly growing coal dependency. “Every time we shut down a coal plant in the U.S., China builds 10,” Moore told E&E News. “So how does that reduce global warming?”

❝ Not only is Moore’s statement simply untrue, but the broader conservative theory behind it is badly outdated. China’s coal use and carbon emissions have dropped for the last two years. In 2015, China cut its coal use 3.7 percent and its emissions declined an estimated 1–2 percent, following similar decreases in 2014.

If China continues to cut its emissions, or even just keeps them at current levels, the country will be way ahead of its goal of peaking emissions by around 2030, which it laid out in 2014 and recommitted to during the Paris climate talks last December.

❝ In part, China’s emissions are dropping because the country is undergoing a dramatic shift in the nature of its economy. For years, China had been rapidly industrializing and growing at a breakneck pace. Growth often causes emissions to rise, all the more so when a country has an expanding manufacturing sector and is building out its basic infrastructure such as highways and rail lines. Heavy industrial activity — especially making cement and steel, which are needed for things like buildings, roads, and rail tracks — can be extremely energy intensive and have a massive carbon footprint…Now, as China is becoming more fully industrialized, its growth is slower and driven more by service industries, like technology, that are much less carbon intensive.

RTFA for several indicators. The author missed one of the most important because it’s still mostly under the radar of those who don’t read deeply into political economy.

Like the UK and many industrial Europeans nations – before the 1960s – China has relied on home coal fires for heating and cooking. China now is on the way to making the same change the West did. Switching to gas. Major pipeline conduits are under construction to bring natgas from Siberia, other regions outside of China. Different pipelines will link into LNG landing facilities at major harbors. As the last-mile, last city block hookups fall into place, the change will be rapid. And welcome.

China wants to deal with their immediate air pollution as much as the ongoing effect on climate. That shouldn’t surprise anyone.

Are you in the American middle class?

About half of American adults lived in middle-income households in 2014, according to a new Pew Research Center analysis of government data. In percentage terms, 51% of adults lived in middle-income households, 29% in lower-income households and 20% in upper-income households.

Our updated calculator below lets you find out which group you are in – first compared with other adults in your metropolitan area and among American adults overall, and then compared with other adults in the U.S. similar to you in education, age, race or ethnicity, and marital status.

Click on graphic to reach article and calculator

New data has updated this calculator – released last December.